Transfer completed on agreement, payment and possession meant capital gains arose in the earlier year, not the year of sale deed.

The registered agreement to sell fixed the consideration, the full sale consideration was paid in instalments, and possession was delivered to the purchaser, so the transaction amounted to a transfer under section 2(47)(v) and section 2(47)(vi) of the Income-tax Act read with section 53A of the Transfer of Property Act. Because the property had already been transferred in the earlier financial year, no capital gain arose in the assessment year under appeal. Section 50C could not shift the year of transfer or create taxable transfer in that year.

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Issues: Whether the transfer of the immovable property was completed in the financial year 2004-05 so as to attract capital gains tax in assessment year 2005-06, and not in the year of execution of the sale deed, with consequent inapplicability of section 50C of the Income-tax Act, 1961 in the impugned year.

Analysis: The registered agreement to sell fixed the consideration, the entire sale consideration was received in two instalments, and possession was handed over to the purchaser. On these facts, the transaction fell within the extended definition of transfer under section 2(47)(v) and section 2(47)(vi) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882. Once the property stood transferred in the earlier year, no transfer remained to be taxed in the assessment year under appeal. The adoption of stamp duty valuation under section 50C of the Income-tax Act, 1961 could not alter the year of transfer.

Conclusion: The transfer was completed in the earlier financial year, capital gains were not taxable in the impugned assessment year, and the Revenue's appeal failed.

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